Mortgage Loan

Investors refinance, lock down risk with low mortgage rates

(4/13/2012) ERATE Exclusive - Investors are not just bum-rushing the for-sale housing market, they are showing they are in it for the long haul by refinancing mortgages to manage their risk.

Most buying and refinance mortgage applications continued downward trends for the week ending April 6, according to the Mortgage Bankers Associations' (MBA) Weekly Mortgage Applications Survey, but investors were flipping mortgages almost as fast as they were flipping homes.

In March 2012, the share of mortgage applications for investment properties increased to 8.3 percent from 7.4 percent in February 2012, fueled by refinance applications.

The share of investors' refinance applications jumped to 9.2 percent in March 2012 from 7.7 percent in February 2012. Purchase applications for investment homes actually declined during the same period from 6.1 percent in February 2012 to 5.7 percent in March 2012.

Year over year, however, investment purchases are booming.

Hand picking individual properties, working in groups, buying in bulk and contracting all-cash deals, investors snatched up properties last year at an astounding pace, buying 64.5 percent more properties in 2011 than 2010, according to the National Association of Realtors (NAR).

MBA said its books revealed the investor share of purchase applications on a year-over-year basis were down slightly, just barely, falling from 5.8 percent in March 2011 to its current level of 5.7 percent in March 2012. However, the combined share of investment and second home purchase and refinance mortgage applications were up overall, again thanks to the rising share of refinance applications, as purchase applications slipped.

Non-investment purchase mortgage and refinances trend down

Low interest rates and affordable housing weren't enough to overcome tight credit and economic blahs that keep mortgage originations and refinancing depressed.

The week ending April 6, mortgage applications decreased 2.4 percent from the previous week, MBA reported. The Refinance Index decreased 3.1 percent, while the Purchase Index fell only 0.5 percent, both from the previous week.

The refinance share of mortgage activity decreased for the eighth consecutive week to 70.5 percent of total applications from 71.2 percent the previous week.

This is the lowest refinance share since July 29, 2011. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.5 percent of total applications from the previous week.


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